Custom, Excise & Service Tax Tribunal
United Shippers Ltd vs Thane Ii on 13 August, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS:
ST/85933, 86857 to 86859 & 87184/2013-Mum
[Arising out of Orders-In-Original No. 100-103/NG/COMMR/Th-II/2012 dated 29/11/2012 & 04/NG/COMMR/Th-II/2013 dated 19/02/2013 passed by the Commissioner of Central Excise Thane II.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Ramesh Nair, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
United Shippers Ltd.
Appellant
Vs
Commissioner of Central Excise
Thane II
Respondent
Appearance:
Shri Naresh Thakkar with Shri P. Choudhary, Advocates for the appellant Shri K.M. Mondal, Spl. Consultant for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Ramesh Nair, Member (Judicial) Date of hearing: 13/08/2014 Date of decision: 16/10/2014 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
There are 4 appeals arising out of Order-In-Original No. 100-103/NG/COMMR/TH II/2012 dated 29/11/2012 passed by the Commissioner of Central Excise Thane II disposing of 4 show cause notices dated 23/10/2008, 10/09/2009, 15/10/2010 & 21/10/2011 respectively covering the period from 01/07/2003 to 31/03/2011. There is a fifth appeal directed against Order-In-Original No. 04/NG/COMMR/TH-II/2013 dated 19/02/2013 passed by the Commissioner of Central Excise, Thane II disposing of show cause notice dated 27/09/2012 covering the period 01/04/2011 to 31/03/2012. By the impugned orders, the Commissioner has held that the services provided by the appellant merit classification under the category of Cargo Handling Services. Accordingly, the Commissioner has confirmed demands of service tax of ` 56,36,38,084/- and ` 2,16, 84,812/- together with interest thereon and also imposed penalties under Sections 75, 76, 77 & 78 of the Finance Act, 1994.
2. The brief facts relevant to the case are as follows. The appellant, M/s United Shippers Ltd. holds Service Tax Registration under the category of Cargo Handling Services & Port Services (Minor) w.e.f. 23/09/2003 and 03/09/2003 respectively. During the relevant period, the appellant had entered into contracts with various customers and agreed to provide various services in relation to stevedoring including on-board stevedoring, barging, loading, unloading, transportation of cargo by barges from Mother Vessels to Jetty, handling, weighment, deployment of security services, storage and all other services necessary for successful discharge of cargo. Acting on intelligence that the appellant was evading service tax on the services rendered by it to its various customers which appeared to be taxable under the category of Cargo Handling Services, the officers of DGCEI, Mumbai Zonal Unit, caused necessary investigation. The investigation revealed that the appellant was providing a composite activity of cargo handling to its customers, but splitting up the gross consideration received by raising separate invoices one for stevedoring, loading, unloading, internal haulage, deployment of security and storage charges under the descriptionPort Services (Minor Ports) and another for Shipping Charges & Reimbursement of Expenses incurred at the Port for wharfage, transshipment and Jetty usage charges. The officers also found that the appellant was discharging service tax only on Port Services (Minor Ports) and not on the Shipping Charges. It, therefore, appeared that shipping charges/shipping freight realised by the appellant from its customers were liable to be included in the taxable value under Section 67 of the Finance Act, 1994 inasmuch as the gross amount realised by it was in relation to Cargo Handling Service provided. After completion of necessary investigation a show cause notice dated 23/10/2008 was issued to the appellant by the ADG, DGCEI, Mumbai covering the period from 01/07/2003 to 31/03/2008. Seeking to classify the services provided by the appellant under the category of Cargo Handling Services under Section 65(23) r/w Section 65(105)(zr) of the Finance Act, 1994, besides demanding service tax along with interest from the appellant and proposing imposition of penalties under Sections 75, 76, 77 & 78 of the Finance Act, 1994. Later on, 4 more periodical show cause notices dated 10/09/2009, 15/10/2010, 21/10/2011 & 27/09/2012 were issued by the Commissioner of Service Tax, Mumbai covering the period from 01/04/2008 to 31/03/2012 on the same ground. The demands were confirmed and penalties imposed. Hence these appeals by the appellant.
3. The ld counsel for the appellant made the following submissions:-
3.1. At the outset, a tabular summary of the tax position adopted by the Appellant during the impugned period is set out below.
PERIOD POSITION IN LAW TAX TREATMENT ADOPTED BY THE APPELLANT Port to Port Transportation Transportation through barges Charges for handling activities 16.08.2002 to 30.06.2003 Introduction of entry for Cargo Handling Service No Service Tax applicable No Service Tax applicable Service Tax paid under Cargo Handling Service 01.07.2003 to 31.08.2009 Introduction of entry for Other Port Services (Minor Ports) No Service Tax applicable No Service Tax applicable Service Tax paid under Other Port Services (Minor Ports) 01.09.2009 to 30.06.2010 Introduction of entry for Transportation of Coastal Goods Service Service Tax paid under Transportation of Coastal Goods Service (Pet Coke Exemption Claimed) Service Tax paid under Transportation of Coastal Goods Service (Pet Coke Exemption Claimed) Service Tax paid under Other Port Services (Minor Ports) Post 01.07.2010 Expansion of the definition of Other Port Services (Minor Ports) to cover any service provided within a minor port (with / without authorisation of the port) Service Tax paid under Transportation of Coastal Goods Service (Pet Coke Exemption Claimed) Service Tax paid under Other Port Services (Minor Ports) Service Tax paid under Other Port Services (Minor Ports) The Appellant submits that the aforesaid tax position adopted is in accordance with the Service Tax provisions, for the reasons detailed herein below.
3.2. TRANSPORTATION OF GOODS FROM THE MOTHER VESSEL TO THE JETTY AND VICE-VERSA IS NOT LIABLE TO SERVICE TAX The activity of transshipment of import and export cargo, from the mother vessels to the jetty and vice-versa, is carried out by the barges (termed as daughter vessels) on account of the draft not permitting the mother vessels to travel until the jetty at minor ports. The appellant submits that it is a settled position in law that such transshipment of cargo from the mother vessel to the jetty is to be treated as a continuation of the journey of the goods in the import stream into India, as upheld in:
> South India Corporation (Agencies) Ltd. vs. Collector of Customs and Ors. [1987 (30) ELT 100 (Cal.)] > Turner Morrison and Co. Ltd. vs. Asstt. Collector of Cus. for Exports (II) [1999 (110) ELT 484 (Cal.)] > Collector of Customs, Ahmedabad vs. Shipping Corporation of India Ltd [1987 (29) E.L.T. 182 (Tribunal)].
The freight amount charged to the customer for the barge transportation of goods from the mother vessel to the jetty forms a part of the assessable value of the imported goods, for the purpose of computation of Customs Duty. The inclusion of the freight amount has been explicitly mandated by the amendments effected to Section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Price of imported Goods) Rules, 2007. These amendments were made in order to overcome the decision in Ispat Industries Ltd. vs. Commissioner of Customs, Mumbai [2006 (202) E.L.T. 561 (S.C.)] and ensure the position in law which had always been intended by the Legislature, and accordingly, the said position would equally apply for the period prior to 2007. Therefore, the value of the transportation by transhipment is treated as an intrinsic part of the value of a goods transaction, and the said amount therefore cannot attract the levy of Service Tax simultaneously as being in the nature of consideration for provision of services. Reference is made to the decision in Escotel Mobile Communications Ltd. vs. Union of India [2004 (177) ELT 99 (Ker)] wherein it was held that, based on the aspect theory, the same transaction could be exigible to different taxes in its different aspects in that case, the issuance of a SIM card to a subscriber could be equally liable to Sales Tax and Service Tax at the same time. This view was challenged before the Honble Supreme Court in BSNL vs. UOI [2006 (2) STR 161 (SC)] in which the aforesaid finding of the High Court was overruled, and it was categorically held that the aspect theory would not apply to enable the value of the goods to be included in the rendition of services or vice-versa. In the present case, the freight charged for the barge transportation of the goods from the mother vessel to the jetty is includible in the assessable value on which Customs Duties are levied. Applying the rationale laid down in the aforesaid ruling of the Honble Supreme Court, once the freight has already rightly suffered Customs Duties as a part of the value of the goods being imported, a dual levy of Service Tax cannot also be imposed on the self-same freight amount, and the demand on this basis cannot sustain. Further, it is submitted that this activity of transportation of goods from the mother vessel to the jetty is carried out before the goods crosses the customs frontier of India, and consequently, will be construed to be undertaken while the goods are still in the import stream and prior to the successful completion of the process of importation of the goods into India. [Garden Silk Mills Vs Union of India (1999) 113 ELT 358 (SC)]. Reliance is also placed on the decision of the Honble Supreme Court in the case of Hotel Ashoka vs. Asst. Commr. of Commercial Taxes [2012 (276) ELT 433 (SC)], wherein it that held that an activity of sale of items in the duty free zone of an airport will not attract the levy of VAT, even though such sale is actually taking place within the physical territory of India, as such goods had not crossed the customs frontier of India to form a part of the mass of goods meant for consumption in India, and had therefore not been imported into India. It is therefore submitted that taxing the transshipment of the goods in the present case will be tantamount to levying Service Tax on an activity of import of goods, which is impermissible in law.
3.3. WITHOUT PREJUDICE, NO SERVICE TAX IS LEVIABLE ON THE TRANSPORTATION ACTIVITY WHEN IT IS PART OF A SEPARATE SCOPE OF WORK UNDER THE CONTRACTS, AND FOR WHICH SEPARATE INVOICES ARE RAISED The Appellant submits that the contracts with its customers always contain a separate scope of work with separately identified consideration for the barge transportation activity and for the cargo handling activity at the ports. Furthermore, the Appellant always raises separate invoices for the transportation and handling activities, in accordance with Circular F. No. B11/1/2002-TRU dated 01.08.2002. The said Circular clarified that if there a composite contract for transportation and cargo handling, no Service Tax is payable on the transportation limb under the entry for Cargo Handling Service so long as separate invoices are raised. This position has also been upheld in various decisions including:
> E.V. Mathai & Co. vs. Commissioner of Central Excise, Cochin [2003 (157) E.L.T. 101 (Tri. - Bang.)];
> Bhagyanagar Services vs. Commr. of C. Ex., Hyderabad [2006 (4) S.T.R. 22 (Tri. - Bang.)];
> Southern India Corporation Limited vs. CCE, Trichy [2011 (22) S.T.R. 70 (Tri. - Chennai)].
The Appellant also submits that unless the Department can provide evidence to the contrary, agreements between contracting parties are required to be read on the basis that they reflect the true intention of the parties thereto. In this connection, reliance is placed on the following decisions.
> Union of India v. Mahindra and Mahindra [1995 (76) E.L.T. 481 (S.C.)] > Mirah Exports Pvt. Ltd. vs. Collector of Customs [1998 (98) E.L.T. 3 (S.C.)] 3.4. WITHOUT PREJUDICE, THE DOMINANT NATURE OF THE ACTIVITY IS IN ANY EVENT TRANSPORTATION, AND NOT CARGO HANDLING It is submitted that even if the activity carried out by the Appellant is construed as a composite service comprising barging and handling, in terms of Section 65A(2) of the Act, the essential / dominant character of such composite service is evidently the barging activity without which the cargo handling activity would not be necessitated at all. Moreover, the Appellant has never carried out the activity of only cargo handling at the port, i.e. unloading of cargo at jetty, internal transport of cargo inside port etc., without carrying out the basic activity of barge transportation of the goods from the mother vessel to the jetty and vice-versa. The Appellant submits that the Respondent himself has recorded a finding to this effect, at paragraph 42 of the Order-in-Original, viz. the dominant nature of the activity carried out by the Appellant is the transportation activity. The Appellant submits, that despite arriving at the aforesaid conclusion, the Respondent erroneously then proceeds to hold that the activity is liable to Service Tax under the taxing entry of Cargo Handling Service. Such an attempt to levy tax under the said taxing entry when the transportation is the dominant activity (and not the cargo handling at both ends of transportation) has been rejected in various decisions including:
> Hira Industries Ltd. vs. Commissioner of Central Excise, Raipur [2012 (28) S.T.R. 23 (Tri. - Del.)];
> Jet Airways (India) Ltd vs. Commissioner of Service Tax, Ahmedabad [2008 (11) S.T.R. 645 (Tri. - Ahmd.)];
> R.K. Transport Company vs. CCE, Raipur [2012 (27) S.T.R. 496 (Tri. - Del.)].
3.5. The Appellant further submits that it has in no manner acted so as to evade tax, but has instead adopted a conservative position and bifurcated the cargo handling element in order to offer it to Service Tax, when it could all along have retained a single contract with a single scope of work and taken the position that the dominant nature was transportation, on which no tax was payable.
3.6. THE IMPUGNED ACTIVITY DOES NOT MEET THE REQUIREMENTS OF THE TAXING ENTRY FOR CARGO HANDLING:
It is submitted that the taxing entry for Cargo Handling Service only covers freight which is incidental to the activity of cargo handling. In present case, this will at most extend to the activity of internal haulage of the goods from the jetty to the storage area within the port (a maximum of a few hundred metres). However, the barge transportation of the goods over distances ranging from 11 to 55 kilometres cannot by any stretch be construed as an activity of freight which is merely incidental to the cargo handling activity. Furthermore, the taxing entry for Cargo Handling Service specifically excludes cargo which is in the export stream. However, in the present facts, in addition to seeking to levy Service Tax on goods in the import stream, the Respondent has also confirmed the demand in respect of goods in the export stream, which cannot sustain in terms of the taxing entry itself.
3.7. NO LIABILITY UNDER PORT SERVICE PRIOR TO 01/07/2010 The Appellant submits that in many instances, the mother vessels are parked beyond the port limits, where the activity of loading / unloading and transportation are carried out. In these scenarios, the majority of the activities themselves not having taken place within the port area, cannot be brought to tax under the entry for Port Services, as the said taxing entry covers only those activities carried out within the port limits. Without prejudice, it is submitted that prior to 01.07.2010, the taxing entry for Port Services covered only those activities carried out within a port premises which specifically required an authorisation from the Port. The term authorisation is distinct from a mere licence to operate within the port area. An authorisation process requires entering into a contract with the port authority for the given activity, submission of a tariff to the port authority for the proposed activities, and ratification of the tariff by the port followed by its publication in the Official Gazette. Such authorised party is then not permitted to charge rates which are higher than the rates so published. A licence, on the other hand, implies that the party simply has a no-objection / permission for operating within the port area, but can enter into contracts directly with private parties to carry out the activity in question, and can agree upon the rates on the basis of commercial negotiations. The Appellant submits that the taxing entry for Port Services did not cover the activity of transportation carried out by the Appellant prior to 01.07.2010 as it was not required to obtain any such authorisation for the barging operations. The Appellant submits that post 2010, this requirement of authorisation was removed from the entry for Port Services and the Appellant has been duly discharging the Service Tax thereafter.
3.8. THE ACTIVITY OF TRANSPORTATION OF COASTAL GOODS FROM ONE PORT TO ANOTHER IS NOT LIABLE TO SERVICE TAX PRIOR TO 01/09/2009 At the outset, the Appellant submits that while the SCNs were issued on the basis that the Appellant was only carrying out barging activity from mother vessel to jetty and vice-versa, the Appellant in fact also earns freight income from its business of transportation of coastal goods from one port to another within India. This activity was only brought to tax w.e.f. 01/09/2009 under the taxing entry for Transportation of Coastal Goods Service. In this regard, the Appellant places reliance on the Speech of the Honble Finance Minister dated 06/07/2009 while introducing Union Budget 2009-10, in which it was specifically stated at Paragraph 132 that up to 31/08/2009, Service Tax was applicable only on the transportation of goods by road and air, and through pipelines and containers, and it was acknowledged that Service Tax was not being levied on transportation by waterways. Therefore, in order to bring about parity in taxation, the transportation of coastal goods or through national / inland waterways was made leviable to Service Tax w.e.f. 01/09/2009. The Appellant also places reliance on upon the Circular No. D.O.F. No.334/13/2009-TRU dated 06/07/2009 issued by Ministry of Finance wherein it was clarified that this entry marked the first attempt on the part of the Ministry of Finance to levy Service Tax on transportation of coastal goods. In light of the above, the Appellant submits that the activity of transportation of goods from port to port was liable to tax only w.e.f. 01/09/2009 post which the Appellant duly discharged the tax. Further, where the coastal cargo was in the nature of pet coke, the Appellant rightly claimed exemption under Notification No. 30/2009-ST dated 31/08/2009.
3.9. LIMITATION 3.10. Without prejudice, the Appellant submits that the extended period of limitation is not invokable in the present case as the issue involved is one of bona fide interpretation. In this regard, attention is drawn to the fact that there was confusion in the Departments own mind as to the correct classification. This is evident from the fact that the Department vide letter dated 22/02/2008 initially sought to recover the tax under the entry for Port Services but changed its stance to Cargo Handling Service upon being informed by the Appellant vide letter dated 27/02/2008 that it did not possess the requisite port authorisation for the barging to be classified under Port Services. The Appellant also places reliance upon the decision in Uniworth Textiles Ltd. vs. CCE, Raipur [2013 (288) ELT 161 (SC)], wherein it was held that the extended period of limitation is not invokable for mere non-payment and requires a deliberate default on the part of the assessee. It is submitted that there has evidently been no such deliberate evasion of tax on the part of the Appellant in the present case, and the demand which is beyond the normal period of limitation therefore cannot sustain.
3.11. In light of the foregoing, it is prayed that this Honble Tribunal may be pleased to set aside the Order-in-Original 100-103/NG/COMMR/Th-II/2012 dated 29/11/2012 and Order-in-Original No. 04/NG/COMMR/Th-II/2013 dated 18/02/2013 with consequential reliefs.
4. The ld. Spl. Consultant for the Revenue made the following submissions.
4(a) There is no dispute that the appellant is a Cargo Handling Agency. Under contracts with its various customers, the appellant is providing services in relation to stevedoring, barging, unloading, loading, transportation of cargo by barges from Mother Vessels to Jetty, handling, weighment, deployment of security services, storage and all other services necessary for successful discharge of cargo. The appellant does not undertake merely transportation of cargo from the Mother Vessels to the Jetty and vice versa. It undertakes a wide range of activities including transportation of cargo from the Mother Vessels to the Jetty.
4(b) In his statement dated 10/10/2006, Shri Sunil Sevantilal Parekh, the MD of the appellant firm, while explaining the nature of activities of the appellant company and the services rendered by it, had, inter alia, stated that they arrange stevedoring labour on board the vessel, machines for unloading barges, pay loaders for loading of cargo into trucks. They also arrange barges to approach the Mother Vessels for loading and unloading of cargo and back to the Jetty. The question, therefore, is whether the activities undertaken by the appellant are covered by the Cargo Handling Service under Section 65(23) read with Section 65(105)(zr) of the Finance Act, 1994.
4(c) The definitions of Cargo Handling Service and Taxable Service under Section 65 (23) read with 65 (105)(zr) of the Finance Act, 1994, were as follows:-
w.e.f. 16/08/2002 Cargo Handling Service means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport and cargo handling service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods. w.e.f 16/5/2008 Cargo Handling Service means loading, unloading, packing or unpacking of cargo and includes
(a) cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight; and
(b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include, handling of export cargo or passenger baggage or mere transportation of goods;
Section 65 (105)(zr) Taxable Service means any service provided or to be provided to any person, by a cargo handling agency in relation to Cargo Handling Services.
4(d) Vide Circular: B11/1/2002-TRU dated 01/08/2002, the Board has clarified the scope of the Cargo Handling Service in AnnexureII to this circular. Paras 3, 3.1, 3.2, 4 & 5 which are relevant for the purpose are reproduced below:
3.?The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services.
3.1?The services provided in relation to export cargo and passenger baggage are excluded from tax net.
3.2?Mere transportation of goods is not covered in the category of cargo handling and is therefore not liable to service tax.
4.?A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner. The measure of tax is the gross amount charged by the cargo handling agency from the customer. Therefore, if lumpsum amount is charged for both transportation and cargo handling, the tax will be payable on the entire amount. On the other hand, if the bill indicates the amount charged for cargo handling and transportation separately on actuals basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges.
5.?Cargo handling services are provided in the port also. Whether such service will be covered in the category of port services or cargo handling service. In this context it may be mentioned that port services cover any service provided in relation to goods or vessels by a port or a person authorized by the port. This includes the cargo handling service provided within the port premises. Therefore to this extent there may be an overlap in cargo handling service and the port service. However since port services covers all the service in relation to goods and vessels and therefore more specific to port, the service provided in a port in relation to handling of goods would be appropriately covered under port service and no separate levy will be attracted under the category of cargo handling agency service. Similar would be the case in respect of service provided for storage of goods in the port premises. 4(e) According to the Department, the services provided by the appellant to its customers were a continuous chain of activities originating from the point of unloading of cargo from the Mother Vessels and culminating at the point of loading of the said cargo onto the trucks of the customers for final delivery. Therefore, the services provided by the appellant are clearly a composite service including transportation of the cargo by barges from the Mother Vessels to the Jetty. As per facts on record, the appellant had provided services to its customers in relation to various goods like coal, sulphur, cement, etc. from the point of unloading of the cargo from the Mother Vessels right upto the point of loading onto the trucks of the customers or to the point of storage. Therefore, the services provided by the appellant are clearly covered by the statutory definition of cargo handling service which includes within its scope loading, unloading, cargo handling services provided for freight in special containers or for non-containerized freight, for all modes of transport and cargo handling services incidental to freight. Consequently, in terms of Boards Clarification as reproduced above, in a case where transport and cargo handling service is provided in a composite manner, service tax will be payable on the entire amount charged for both transportation & cargo handling.
4(f) As mentioned before, under various contracts with its customers, the appellant is providing a wide range of services including transportation of cargo from the Mother Vessels to the Jetty for successful discharge of cargo. One such contract is the contract dated 18/05/2005 with M/s. Century Rayon for discharging of 1800 MTs of Sulphur Cargo coming into PNP Dharamtar jetty on board the vessel MV Iran Ghyemat.
4(g) For better appreciation, relevant clauses of the contract are reproduced below:
- Whereas USL has agreed to perform stevedoring/barging /transportation, from the Mother Vessel for the jetty, storing the material and loading on CR trucks at plot for final delivery. CR had agreed to grant the contract for above job to USL as set out under:
- CR agrees to engage and USL agrees to perform all services necessary for successful discharge of cargo from the Mother Vessel, handling, storage upto loading onto CR trucks:
- SCOPE OF WORK (I) A) SHIPPING:-
- Shipping charges of sulphur cargo from Mother Vessel to Dharamtar jetty.
B) REIMBURSEMENT OF CHARGES:
- Reimbursement of expenses incurred at port for wharfage, transshipment and jetty usage charges.
C) PORT SERVICES:
- On board stevedoring at Mumbai Floating Light/Inner anchorage of Mumbai Port Trust
- Unloading of barges of PNP jetty and loading into trucks
- Loading of trucks for final dispatch
- Weighment of cargo (once) at Dharamtar port
- Deployment of security services for your cargo
- Transportation to storage areas.
- Free storage period upto 30 days from the date of discharge completion.
- In case of storage of the cargo at the plot exceeds 30 days then the storage rent will be applicable @ Rs. 20/- PMT per month on the balance cargo towards supervision.
- (VII) REMUNERATION:
* For Scope of work, detailed under 1A : Rs. 218.49 PMT * For Scope of work, detailed under 1B : Rs. 20.94 PMT * For Scope of work, detailed under 1C : Rs. 35.00 PMT Plus service tax as applicable Total : Rs. 278.00 PMT Basis bill of lading weight/draft survey whichever is higher.
Any and all lighterage charges to/on the Mother Vessel levied by MbPT and any and all BSA levy are not included in this rate.
- (VIII) PAYMENT TERMS:
Payment for the handling services rendered by USL shall be made as follow:
* Rs. 139/- PMT to be paid by CR to USL 3 days prior to vessel arrival.
* Rs. 139/- PMT to be paid by CR to USL within 30 days of arrival of vessel/prior to completion of 50% of delivery at cargo, whichever is earlier.
* In case CR do not comply with the payment terms as mentioned above, then an interest of 18% p.a. will be levied by USL on CR for the amount so delayed.
* USL holds the right to withhold the cargo of CR, until the entire amount due to USL is paid by CR to USL.
- (XIII) Insurance:
The responsibility of USL is to ensure that their barges are adequately insured and premium is paid upto date, whereas the responsibility of CR is to ensure that their cargo is adequately insured from the point of unloading from Mother Vessel up to cargo loaded on to CR trucks.
4(h) On a careful reading of the relevant clauses of contract, it would appear that it is essentially a composite contract under which the appellant has agreed to perform all services necessary for successful discharge of cargo from the Mother Vessel, handling, storage upto loading onto the trucks of the customers. The services provided appear to be integrally connected with handling of cargo without mere activity of transportation of such cargo. This issue appears to have been settled by the Tribunals decision in the case of Gajanand Agarwal V/s. CCE, BBSR 2009 (3) STR 138 (T). Paras 15 & 16 which are relevant for the present purpose are reproduced below for favour of perusal:
15.?Combined reading of provisions of section 65(105)(zr) and 65(23) of the Act throw light that cargo handling agencies are taxable entities. Cargo handling service provided by such entities attract the levy of service tax. Section 65(23) has a wide amplitude and has brought all like nature activities to its fold expressly and by inclusion of such like nature activities under the class cargo handling services. However classification of service under this category is subject to two exceptions/exclusions: viz.,: (1) handling of export cargo or passenger baggage and (2) mere transportation of goods. These two activities are beyond the scope of such class from taxation for rationale behind them. Accordingly, cargo handling services provided in respect of domestic cargo only are liable to tax. Event of levy arises when service relating to or in relation to handling of cargo is provided by a cargo handling agency irrespective of mode of transport used for movement of such cargo. Precisely, following activities which are contemplated to be taxed as cargo handling service are:
(1) By express terms :
(A) Loading, unloading, packing or unpacking of cargo;
(2) By inclusive terms :
(B) Handling service relating to cargo :
(i) Provided for freight in special containers or for non-containerised freight;
(ii) Provided by a container freight terminal or, by any other freight terminal; and (3) Cargo handling service provided which is incidental to freight.
16.?What that appears to be necessity of law for taxation under the class cargo handling service is that the service provided should be relating to or in relation to cargo handling by a cargo handling agency. The service provided should be integrally or inseparably connected with handling of cargo or attributable thereto without being a mere activity of transportation of such cargo since transport service independent of cargo handling is an exception under the scheme of levy by Section 65(23) of the Act. Thus it can be said that loading, unloading, packing or unpacking of cargo and handling of cargo for freight in special containers or non-containerized freight and service provided by container freight terminal or other freight terminal for all modes of transport are subject matter of taxation under the class cargo handling service. That apart, any activity incidental to freight of cargo is also liable to be taxed under such class. Mode of transport is irrelevant for incidence of levy once the service provided meets the test of handling of cargo in the manner envisaged by law. It is also not necessary that the cargo should only be meant for transport either by vessel in ships or aircrafts. 4(i) Ld. Counsel for the appellant contended that the question of levy of service tax will arise only when the cargo is brought to the Port and any service is provided in relation to such cargo. According to the ld. Counsel, the journey of the barges is in continuation of the journey of the Mother Vessels upto the Dharmatar Jetty. In this connection, he took support from the judgments of - (i) Ispat India Ltd. V/s. CC, Mumbai - 2006 (202) ELT 561 (SC), (ii) Turner Morrison & Co. Ltd. V/s. ACC for Exports(II)- 1999 (110) ELT 484 (Cal) and (iii) South India Corp. (Agencies) Ltd. V/s. CC & Ors. - 1987 (30) ELT 100 (Cal). Ld. Counsel also contended that the freight incurred for transportation of the cargo by barges which is already included in the value of the goods imported cannot be subject to levy of service tax. It would amount to double taxation under the Customs Act, 1962 and the Finance Act, 1994.
4(j) It appears that transport of cargo by barges from the Mother Vessels had taken place when the Mother Vessels were at Mumbai Floating Light/Inner Anchorage of Mumbai Port Trust, i.e. when the vessels were already in India. Therefore, there does not appear any legal bar to levy service tax on the services provided in relation to the cargo transported by the barges from the Mother Vessels to the Jetty. It would also not be correct to say that it would amount to double taxation. The levy of customs duty and service tax are under two separate enactments. Therefore, both the levies are permissible simultaneously. In the case of CST, Bangalore V/s. Lincoln Helios (India) Ltd. 2011 (23) STR 112 (Kar), the Honble High Court has held that excise duty is levied on the aspect of manufacture and service tax is levied on the aspect of services rendered. Therefore, it will not amount to payment of tax twice.
4(k) Total 5 show cause notices have been issued. The 1st Show cause notice dated 23/10/2008 covers the period from 01/07/2003 to 31/03/2008. This show cause is partly within the normal period and partly beyond the normal period. The remaining show cause notices are within the normal period. As however, the appellant had suppressed the entire value of taxable service rendered by it to its customers, the extended period of limitation for part of the demand raised by the 1st show cause notice has been rightly invoked.
4(l) For the reasons as stated above, penalties imposed on the appellant under Sections 75, 76, 77 & 78 of the Finance Act, 1994 are also sustainable.
4(m) In view of the foregoing, he pleads that the impugned orders passed by the Commissioner be confirmed.
5. We have carefully considered the submissions made by both the sides. Our findings and conclusions are enumerated in the ensuing paragraphs.
5.1. The issues for consideration in these appeals can be summarised as below:-
(a) Whether barge (shipping) charges collected towards transportation of the imported goods from the mother vessel anchored at Bombay Floating Lights to Dharmatar jetty where the goods were unloaded, which forms part of the transaction value of the imported goods can be once again levied to service tax under the category of cargo handling services ?
(b) Whether in a composite contract for transportation services and cargo handling services which provides for separate rates for these activities, can service tax be levied under a single category of cargo handling service, by treating transportation as sub-ordinate to cargo handling ?
(c) Whether coastal transportation of goods is leviable to service tax under cargo handling services?
(d) Is extended time period invokable in the facts of the present case for confirmation of service tax demand and consequent imposition of penalty?
5.2. As regards the first issue, since the transaction involves a customs transaction and a service transaction, it is necessary to decide where the customs transaction ends and the service transaction begins. The issue as to what constitutes imports has been settled by the honble apex court in the case of Garden Silk Mills Ltd. (supra), wherein the apex court held as follows:-
Truly speaking, the imposition of import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e. before they form part of the mass of the goods within the country.
It would appear to us that the import of the goods into India would commence when the same cross into the territorial waters but continues when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. Thus when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India. The question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transaction is completed. Therefore, the question of levying to service tax the transportation by barges from the mother vessel to the jetty onshore, would not arise at all since the said activity is part of the import transaction leviable to import duty and we hold accordingly.
5.3. This is also evident from the fact that section 14 of the Customs Act, 1962 relating to determination of value of import goods for the purposes of levy of customs duty and the Customs Valuation Rules, 2007 (CVR in short) were amended to specifically include barge charges and handling charges in the transaction value of the imported goods vide Finance Act, 2007 to overcome the adverse decision in the case of Ispat Industries (supra). Section 14 was substituted to specifically provide that transaction value of imported goods shall include, in addition to the price, any amount paid or payable for costs and services, including commissions, .,cost of transportation to the place of importation, insurance, unloading and handling charges to the extent and in the manner specified in the rules made in this regard. Rule 10 (2) of CVR specifically provided for-
(2) For the purposes of sub-section (1) of section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of the imported goods shall be the value of such goods, for delivery at the time and place of importation and shall include
(a) the cost of transport of the imported goods to the place of importation;
(b) loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation; and
(c) the cost of insurance :
Provided that
(i) where the cost of transport referred to in clause (a) is not ascertainable, such cost shall be twenty per cent of the free on board value of the goods;
(ii) the charges referred to in clause (b) shall be one per cent of the free on board value of the goods plus the cost of transport referred to in clause (a) plus the cost of insurance referred to in clause (c);
(iii) (iii) where the cost referred to in clause (c) is not ascertainable, such cost shall be 1.125% of free on board value of the goods;
Provided further that in the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods:
Provided also that where the free on board value of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (i) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii).
Provided also that in case of goods imported by sea stuffed in a container for clearance at an Inland Container Depot or Container Freight Station, the cost of freight incurred in the movement of container from the port of entry to the Inland Container Depot or Container Freight Station shall not be included in the cost of transport referred to in clause (a).
Explanation.- The cost of transport of the imported goods referred to in clause (a) includes the ship demurrage charges on charted vessels, lighterage or barge charges.
These amended provisions came into force with effect from 10/10/2007. The CBEC has also clarified vide circular 34/2009 dated 30/11/2009 that the issue of includibility of barge charges in the value (of imported goods) will be governed by the provisions of section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 for the assessment arising in the period from October 10, 2007 onwards. Thus the question of demand of service tax on barge charges and the handling charges connected therewith would not arise at all with effect from 10/10/2007 as they form an integral part of the transaction value for levy of customs duty. Even for the period prior 10-10-2007, the same position would apply for the reason that the import transaction is complete only when the goods reach the customs barriers and the bill of entry for home consumption is filed.
5.4. As regards the second issue as to whether in a composite contract for transportation services and cargo handling services which provides for separate rates for these activities, can service tax be levied under a single category of cargo handling service, we find that this issue has been settled in favour of the appellant and against Revenue by this tribunal in a number of cases. In Hira Industries Ltd. case, this Tribunal considered a more or less identical issue and held as follows:-
18. The next issue is the classification of service rendered by the transport contractors whether it is Transportation of Goods or Cargo Handling Service. We are not in agreement with the argument that the service involved is cargo handling service and not transportation service. When there is composite service the service should be classified as per provisions in section 65A of Finance Act, 1994. As per this section the sub-clause which gives the most specific description is to be adopted. If this criterion fails then the service is to be classified as the service which gives the essential character of the service. This composite service has elements fitting into the definitions of both the services. So recourse is to be taken to section 65A (2) (b). Here it cannot be considered that transportation is for the purpose of loading and unloading but the contrary is true. That is loading and unloading is for transportation. Any person dealing with the situation perceives the services as one for transportation and not for loading and unloading. So on this count we are not in agreement with the argument of Revenue. The same view was taken by this Tribunal in Jet Airways (India) Ltd vs. Commissioner of Service Tax, Ahmedabad [2008 (11) S.T.R. 645 (Tri. - Ahmd.)] and R.K. Transport Company vs. CCE, Raipur [2012 (27) S.T.R. 496 (Tri. - Del.)]. Following the ratio of these decisions, we answer this question in favour of the appellant and against the Revenue, in the facts of the case before us. The CBEC circular B/11/1/2002-TRU dated 01/08/2002 also make this position very clear. In Annexure II to the said circular, in para 4 thereof, it has been clarified if the bills raised for the services rendered indicates the amount charged for cargo handling and transportation separately on actual basis, then the tax would be leviable only on the cargo handling charges. The contracts entered into with the customers show separately the charges towards shipping charges of cargo from Mother Vessel to Dharamtar jetty. Therefore, there is no merit in the contention that transportation charges should be included in the value of taxable services in respect of cargo handling service.
5.5. The next issue for consideration is whether coastal transportation of goods could be levied to service tax under cargo handling service prior to 06/07/2009. Transport of coastal goods and goods transported through inland water came under the purview of service tax levy vide Finance Act, 2009, with effect from 06/07/2009. Vide notification No. 30/2009-ST dated 31/08/2009 transport of coastal goods in respect of items specified in the Table annexed thereto were exempt from service tax. The appellant herein undertook coastal transportation of fertilizers, which is one of the items specified in the notification as eligible for exemption. Revenue is seeking to confirm service tax demand under the category of cargo handling service. It is a settled position in law that when a new entry is brought under service tax levy, the same activity cannot be subjected to levy under an existing entry unless the new entry is carved out of the existing entry as held by the honble Bombay High Court in the case of Indian National Shipowners Association [2009 (14) STR 289 (Bom)]. Therefore, there cannot be any demand for service tax on coastal transportation of goods prior to July, 2009. Further, the goods transported by the appellant is also covered by Notification 30/2009-ST. In this factual and legal scenario, the demand of service tax under the category of cargo handling service has to be set aside especially when the activity is squarely covered under the entry of coastal transportation of goods and we hold accordingly.
5.6. The last issue for consideration is whether extended period of time could have been invoked in the facts of the present case. In the present case, the Department initially sought to recover the tax under the entry for Port Services vide letter dated 22.02.2008 but changed its stance to Cargo Handling Service upon being informed by the Appellant vide letter dated 27.02.2008 that it did not possess the requisite port authorisation for the barging to be classified under Port Services. The decision of the apex court in Uniworth Textiles Ltd. vs. CCE, Raipur [2013 (288) ELT 161 (SC)], wherein it was held that the extended period of limitation is not invokable for mere non-payment and requires a deliberate default on the part of the assessee, is also applicable. The facts available on record clearly show that the department itself was not clear as to the classification of service rendered by the appellant and has been changing their stand. In such a scenario, the allegation of suppression with an intent to evade service tax cannot be sustained. Thus the appeal succeeds on account of time bar also apart from merits.
5.7. As regards the reliance placed by the Revenue on the case laws pertaining to Gajanand Agarwal and Lincoln Helios (India) Ltd., we notice that the said decisions have no application whatsoever to the facts of the case before us. In the Gajanand Agarwal case, the issue for consideration was whether providing pay loaders for loading of coal into railway wagons would come under the purview of cargo handling service or not. The Tribunal observed that the nature of the activity carried out by the appellant therein was to load the cargo into Railway wagons and therefore, it was held that the activity was taxable under cargo handling service. In the Licoln Helios case, the only question of law considered by the honble High Court was whether setting aside the penalty by the Tribunal was correct when the demand of service tax and interest was upheld and the assessee did not contest the levy. These are not the issues before us nor is there any remote connection with the facts of the case before us. It is a settled position in law as held by the honble apex Court in Al Noori Tobacco Products India Ltd. case [2004 (170) ELT 175 (SC)] that the ratio of a decision can be applied only if the facts are identical. A slight or a material change in the facts could lead to an entirely different conclusion.
6. To conclude, we find that the impugned orders classifying the services rendered by the appellant under cargo handling service and confirming the service tax demands accordingly are clearly unsustainable in law. Accordingly we set aside the same and allow the appeals with consequential relief, if any, in accordance with law.
(Operative part of the order pronounced in Court on 16 /10/2014) (Ramesh Nair) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 2